Being a global manufacturer and seller of pharmaceutical intermediates as well as finished products, Lupin is exposed to pricing risk both as a buyer and seller.

U.S. generics is constantly subject to intense competition and a declining pricing environment in existing portfolio. Companies in the sector remain at risk of a sharp decline in pricing of the products where existing competition might be limited at present.

As a pharmaceutical company also selling Specialty products in the U.S. and EMEA region, Lupin faces downward pricing risk as governments and legislations aim to lower the price of prescription drugs.

High pricing pressure could erode financial margins and affect competitiveness.

The emergence of large buying groups combined with the influence of managed care organizations could lead to increased competition amongst companies and enhanced price risk.

The consolidation and integration of drug wholesalers, retail drug chains, private insurers and other entities have resulted in these groups gaining an advantage in terms of purchasing leverage which increases product pricing pressures for the industry.

• Put increased focus on manufacturing generics and complex generics for large markets like the U.S., thereby offering affordable therapy to patients.
• Set strategic price setting of novel drugs in order to cover the effort and scale of the R&D effort.
• Engage in long-term supply contracts with suppliers of APIs and critical raw materials to hedge from price fluctuations.

Non-compliance may lead to delayed product approvals, penalities, and plant shutdowns.

Lupin's commercial prospects may be impacted by policy regulations such as bans on certain products or combinations.

Quality requirements for Lupin are rigorous across our entire supply chain. Our complex technical manufacturing processes and product specifications increase the inherent risk of quality deviations and batch rejection. Additionally, failure to comply with CGMP regulations at any of our production sites or for any product can impact the regulatory certifications of our sites or pose risk for our patients. Most of our sites are approved by regulatory authorities such as the US FDA, UK MHRA, Japan’s PMDA and the WHO amongst others, and any adverse findings during inspections impacts our ability to successfully execute our pipeline and manage our reputation

Our Pharmacovigilance function monitors and manages the safety of all our products using robust systems and processes to monitor manufacturing standards in compliance with CGMP and other regulatory requirements. Our Quality team conducts internal and external audits to ensure adherence to high-quality standards.

• We have launched a Global Quality Action Plan that ensures that our sites remain in an acceptable state of compliance and are 24x7 audit ready.
• Emphasis on product life cycle management to ensure product quality.
• Pharmacovigilance team tracks any incidence of adverse event caused by any Lupin medication and ensures that the company addresses it.
• Lupin ensures timely recalls of any product by a regulatory authority or through its internal assessment for any defect or failure to meet specification standards.

Delays might occur at manufacturing sites or in logistics, leading to challenges in procurement of ingredients and components as well as dissemination of our final products.

Supply chain risk for Lupin is two-fold – in securing supplies of APIs and other key starting materials for our own production and in maintaining consistent supply of final products to our global customers.

Delays or interruptions in supply can lead to product shortages, which may result in lost product sales and adversely affect our reputation and revenues in a material way.

• Lupin has approximately 30% dependency on external manufacturers for its API requirements with the rest being met by our own API manufacturing sites.
• Additionally, we ensure continuity of API supply for high-value products by engaging alternative API suppliers for critical products, stocking for buffer supplies and supply chain modelling to anticipate disruptions.
• Strategic investments in business intelligence, reporting and forecasting systems have enabled us to build a resilient global supply chain and ensure high service level across markets.

Ensure consistent supply of critical APIs and intermediates.

Focus on evaluating and developing alternate vendors for critical APIs and intermediates.

Timely placement of orders with vendors based on detailed manufacturing plan to ensure timely availability.

Water crises as a result of human overexploitation has adverse consequences for our operations. A major share of water is used for cooling purposes and maintenance of temperatures for critical manufacturing steps and the remaining is used for cleaning equipment and as a solvent within manufacturing processes.

Ample supply of water is critical for all manufacturing processes of pharmaceuticals. Shortage of water supply at our sites will cause disruptions in the continuity of our operations as well as our supply chain, leading to a negative impact on the quality of our medicines. Additionally, as a result of extreme weather events such as floods there is a loss of life and financial loss as well as damage to livelihood and the ecosystem.

Competing for water resources with local communities may lead to a loss of social license to operate and the supply of clean water for our processes.

Management of water discharge and effluents is also important to avoid the pollution of water streams and antibiotic releases can lead to AMR.

We will strategize around adopting water stewardship opportunities to address risks around water supply. Simultaneously, we acknowledge the importance of regular evaluation of the water footprint of our manufacturing processes and thereby will be able to reduce dependence on external sources especially for manufacturing sites with high water stress. We have conducted water risk assessment for all our manufacturing locations in India and are in the process for formulating strategies for the regions with high water risk to further reduce dependence on water resources by increasing recycling and reuse within our own operations.

As a first step towards AMR stewardship, we have also achieved Zero Liquid Discharge status in almost 50% of our Indian manufacturing sites, thereby managing the discharges from our operations.

We manage water risk and scarcity through interventions such as installation of water recycling plants, water efficiency mechanisms, and raising awareness among our stakeholders about the importance of water conservation. Through our CSR activities driven by the LHWRF, we also engage in watershed development activities in drought prone regions and have been able to create water replenishment potential of more than four times our water consumption, thereby making us water positive in our operations.

Geopolitical risks include the collapse of a multilateral institution, interstate conflict, contestation around strategic resources, terrorist attacks among others. Any occurrence of this nature has the potential to severely disrupt our operations along with irreparable damage to life, livelihood and the ecosystem.

Geopolitical risks have the potential to severely impact the manner and mode of our operation. They can also disrupt our supply chain and inhibit the movement of goods and supplies, causing major delays in our processes. They may also lead to apprehension among our investors and shareholders, leading to market losses.

Additionally, trade restrictions between countries could have a material negative impact on our business.

Geopolitical risks also pose a difficulty for collaboration between nation states to progress towards common goals such as climate change adaptation and mitigation, response to pandemic, access to medicines, etc.

We try to evaluate market entry, monitor financial condition and the liquidity of our partners, customers and vendors across all locations of operations and the locations from which we source our raw materials.

We are also consistently monitoring the regional policies and statutes when marketing and selling our products in different regions of the world. We ensure compliance with local laws of the land and are committed to protecting the interest of our employees and have global standards of human rights and fair employment which are applicable to our employees uniformly around the world.

We also strive to partner and enter into global institutional business arrangements to make our products more accessible to the Least Developed Countries and Developing Countries to achieve common global goals of making healthcare accessible to all and reduce the prevalence of diseases in typically underserved regions and markets.

At Lupin Limited, we believe that Environment, Health and Safety (EHS) Management Systems are the key for our sustainable business growth and our continuous efforts are to embed EHS in every aspect of the business way beyond compliance.

We have well defined Environment, Health and Safety and Sustainability (EHS&S) Policy, applicable across the organization. The EHS&S policy covers the fundamentals of not only complying with the regulatory requirements but also excelling in improving the EHS performance through continual improvement.

The EHS policy has a guiding principle for identifying, addressing and eliminating or mitigating any impacts/risks arising from the resource utilisation, processes, unsafe working conditions, waste, effluent generation or emissions. We value the Environment, health and safety of the people above all priorities and understand the need for pollution prevention. EHS management system is the integrated part of our business at all manufacturing locations including R&D.

At Lupin we ensure all legal compliances with the mandates of the governing legislations all the time. We ensure to protect and promote the Health & Safety of people working within our facilities including contractors, visitors. We always ensure that the technological improvements in our facility establishments, maintenance and operational practices are ensured to minimize the risks and associated health hazards.

We have well established process of hazards identification Risk Control measures across the value chain. These risks are checked on periodical basis to ensure the effectiveness of the controls.

At Lupin we have initiated various measures in support of resource conservation, pollution prevention and protection of Environment which includes but not limited to:

• Energy Conservation measures by implementing Renewable Energy Programs like use of Solar Energy, Wind energy etc.
• At source reduction measures and reducing and recycling of the water. Most of our plants operate on zero liquid discharge which is achieved through various process modifications and the adoption of new technologies. We have also implemented rainwater harvesting at our plants, which helps recharge ground water.
• Ground water recharging measures and journey towards Water Positive.
• Environmentally Benign processes and effective utilization of cleaner and greener resources in the form of alternate fuel.
• As a responsible organization, we are collecting post-consumer plastic sent to the domestic market along with our products and sending the same to recyclers or co-processors.

Lupin’s information protection risk is one of the principle enterprise risks. An attack on company’s IT systems or non-compliance with data privacy laws can lead to loss of critical business intelligence, financial loss and loss of reputation. The relevance of this risk has been made even more acute due to COVID-19 requiring office-based workforce moving to a work-from-home model.

The increase in remote working calls for a greater focus on cybersecurity, because of the greater exposure to cyber risk. Cyber-attackers see the pandemic as an opportunity to step up their criminal activities by exploiting the vulnerability of employees working from home.

Privacy protection and cyber security should be thought of as interconnected: as more and more personal information is processed or stored online, privacy protection increasingly relies on effective cyber security implementation by organizations to secure personal data both when it is in transit and at rest.

Cyber security is by no means a static issue with a permanent solution. Threats to information in cyberspace evolve quickly and, more recently, have expanded into new channels such as social media and mobile technologies. As organizations strive to keep pace with the changing landscape created by innovative technologies, social practices and ever-changing threats, data produced, collected and collated on a massive scale can be left vulnerable to those cyber threats. The following are some of the emerging challenges for data protection and cyber security.

1. Complexity of the connected environment: Cyberspace has become inherently complex to manage and challenging to secure due to continuous evolution of cyberspace and data elements continually being combined, connected, compared and linked to other information.
2. Growing sophistication of the threat: Our data trails now leave a larger footprint across cyberspace, leaving us more exposed to threats.
3. Threats are moving to the mobile sphere: As cyber threats increasingly target mobile devices, data protection becomes all the more critical. Communications and transactions using mobile devices are more closely tied with individual users.

Lupin has a mature Information Security Management System Framework in place and is awarded ISO 27001:2013 Certificate by accreditation body and the same is assessed on annual basis from People, Process and Technology perspective. To secure the Work from Home environment, a Zero Trust based architecture is implemented at Lupin for VPN and Internet Gateway Solution, ensuring that security is not compromised even when users are working from remote locations. Additionally, we have a SOC team assessing the Security risk round-the-clock both at perimeter level and at endpoint level.

• While COVID-19 presented significant threats and challenges, it also created opportunities to advance the security of the company.
• Lupin has implemented an effective cyber security infrastructure to protect against data loss and malicious attacks. It continuously monitors the effectiveness of its existing systems to identify and address security gaps. From an infrastructure and security point of view, state-of-the-art solutions such as EDR, ThreatIntel, Zero Trust solutions, different networking solutions, Microsoft O365 package with MDM enabled for BYOD devices, AntiVirus and Cloud offerings like Azure and IBM/HPE/Dell have been deployed for the company’s servers and laptops.
• Continuous employee education campaigns and online certification programs are carried out to foster a cyber-security mindset.

The Pharmaceutical industry is unique as it faces ethical dilemmas distinct from other industries. Given the evolving global regulatory environment, there is substantial increase in regulatory scrutiny and stakeholder expectations.

The ethical issues in the pharmaceutical industry. These can relate to product pricing, affordability of medicines, counterfeit drugs, transparent disclosure, marketing restrictions, advertising, clinical study design, drug safety, advertising, and so on. There are also issues pertaining to the ethical conduct of employees surrounding corruption, bribery, corporate behavior, and fair dealings with all stakeholders. Any damage to Lupin’s reputation will compromise our ability to execute our core business operations.

Our mitigation measures

• Building a culture of integrity which sets out the fundamental values, standards and guidelines for employee conduct at work.
• Well defined global code of business conduct and ethics (“Code”) which acts as a guiding beacon for all employees.
• Robust whistle blower mechanism in place where employees and third parties can raise concerns or violations confidentially and anonymously, without fear of retaliation.
• Proactively training employees in the field force on ethical marketing practices and applicable compliance regulations.
• Mechanism in place for identification of regulatory changes and associated impact to stay abreast of compliance requirements.
• Strong internal audit mechanism to track and report any non-compliant practice across locations.

Enhancements during the year:

• Compliance communications delivered using multi-media approach that includes audio, video, real-life case studies, complex scenarios to give employees a holistic view of the concepts.
• A dedicated Ethics & Compliance tab made available on the intranet for employees across the globe to access various compliance resources.
• Rolled out Third Party Code of Conduct outlining obligations for Suppliers and all third parties from an ethical and ESG perspective.
• Institutionalized Human Rights Policy, Board Diversity Policy and Environment, Health, Safety And Sustainability Policy as part of ESG journey.
• CODE embedded across the organization by implementing mandatory annual E- Training for all employees.

Quality requirements for Lupin are rigorous across our entire supply chain. Our complex technical manufacturing processes and product specifications increase the inherent risk of quality deviations and batch rejection.

Additionally, failure to comply with CGMP regulations at any of our production sites or for any product can impact the regulatory certifications of our sites or pose risk for our patients. Most of our sites are approved by regulatory authorities such as the US FDA, U.K. MHRA, Japan’s PMDA and the WHO amongst others, and any adverse findings during inspections impacts our ability to successfully execute our pipeline and manage our reputation.

Our Pharmacovigilance function monitors and manages the safety of all our products using robust systems and processes to monitor manufacturing standards in compliance with CGMP and other regulatory requirements. Our Quality team conducts internal and external audits to ensure adherence to high-quality standards.

• We have launched a Global Quality Action Plan that ensures that our sites remain in an acceptable state of compliance and are 24x7 audit ready.
• Emphasis on product life cycle management to ensure product quality.
• Pharmacovigilance team tracks any incidence of adverse event caused by any Lupin medication and ensures that the company addresses it.
• Lupin ensures timely recalls of any product flagged by a regulatory authority or through its internal assessment for any defect or failure to meet specification standards.

In course of its business, Lupin is exposed to fl tions in foreign currency exchange rates, interest rates, equity prices, liquidity, and credit risks.

• Tax Risk: Tax risks and exposure can be associated with specific transactions undertaken by us, including associated compliance risk.
• Forex Risk: Lupin has more than two-thirds of its revenues from exports/sale in entities outside India; hence, the company is exposed to forex risk arising out of a good part of its sales and operating expenses being denominated in currencies other than INR.

Lupin has a well-diversified liability profile and we raise funds from domestic and international markets. We consistently work towards increasing our debt maturity and opportunistically tap into pools of liquidity to reduce our financing costs.

• Tax Risk: All tax liabilities due under the law are correctly recorded, accounted and paid for. We ensure:
  • Maintaining cooperative relationships with tax authorities
  • Having strong internal tax team
  • Having strong technical support for tax positions, including opinions from external experts
• Forex Risk: Our forex strategy for the short, mid and the long-term through appropriate forecasting and hedging tools helps us to minimize forex volatility.

We manage our transaction risks by using forward contracts and options. We manage our economic risks by following developments in our geographies of interest closely and initiating checks and balances in geographies exposed to instabilities.